A large percentage taxpayers that receive a tax refund essentially use the refund as a primary savings account. Taxpayers rely on their tax refund for a variety of reasons, including paying for expenses incurred during the holiday season, costs associated with a vacation, paying for items of necessity, or paying for costs incurred due to an emergency. As debts and costs continue to rise, reliance on the tax refund will most likely become more widespread.
Taxpayers have a variety of options at their disposal to calculate an estimated tax refund (prior to actually filing the tax return), including tax professionals and various websites. Taxpayers (either alone or in conjunction with a tax professional) may estimate a tax refund by determining income during the previous year as well as taking into consideration tax contributions that may be considered to be tax credits or deductions, such as a 401K contribution, charitable donations, purchase of solar panels, medical costs, costs associated with a natural disaster, and/or payment of a tax (e.g. property tax).
Once a tax return is filed and processed by the IRS, taxpayers receive the tax refund either by deposit from the taxing authority directly into a bank account or by a check (or other kind of negotiable instrument) mailed from the taxing authority through a postal service.